After more than a year from the beginning of a period of sustained lockdowns around the world, and despite a vaccination program that is providing hope of an exit, we already know that the economy and society as a whole have been severely affected and the repercussions of COVID-19 will last for years to come.
Institutional clients are asking about the impact of COVID-19 on the infrastructure asset class. Did infrastructure prove to be resilient? Which companies managed the situation best? To answer these questions properly, we need to recognize that there are different types of infrastructure assets and that they have all had different experiences and performances through the crisis.
The pandemic has revealed stark differences in the sustainability and resilience of different infrastructure assets. Whereas the demand for infrastructure assets such as airports, highways and public transport has seen a sharp drop in traffic due to restricted discretionary travel, utility networks that provide a critical customer service have proven to be very resilient. Passenger numbers in most transport assets have correlated directly with the various lockdowns over the last year and that has put significant pressure on debt covenants and equity valuations and exposed again the fragility of combining highly geared capital structures with volatile business risk profiles.